No. 16-341
================================================================
In The
Supreme Court of the United States
-----------------------------------------------------------------TC HEARTLAND LLC,
Petitioner,
v.
KRAFT FOOD GROUP BRANDS LLC,
Respondent.
-----------------------------------------------------------------On Writ Of Certiorari To The
United States Court Of Appeals
For The Federal Circuit
-----------------------------------------------------------------BRIEF OF AMICI CURIAE 48 INTERNET
COMPANIES, RETAILERS, AND ASSOCIATIONS
IN SUPPORT OF PETITIONER
-----------------------------------------------------------------PETER J. BRANN
Counsel of Record
DAVID SWETNAM-BURLAND
STACY O. STITHAM
BRANN & ISAACSON
184 Main St., P.O. Box 3070
Lewiston, Maine 04243-3070
(207) 786-3566
[email protected]
Attorneys for Amici Curiae
================================================================
COCKLE LEGAL BRIEFS (800) 225-6964
WWW.COCKLELEGALBRIEFS.COM
i
TABLE OF CONTENTS
Page
TABLE OF AUTHORITIES .................................
ii
INTEREST OF AMICI CURIAE .........................
1
SUMMARY OF ARGUMENT ..............................
3
ARGUMENT ........................................................
7
THE COURT SHOULD REITERATE ITS
LONG-STANDING, NARROW INTERPRETATION OF THE PATENT VENUE STATUTE TO STOP FORUM SHOPPING ...........
7
CONCLUSION..................................................... 26
ii
TABLE OF AUTHORITIES
Page
CASES
Agostini v. Felton, 521 U.S. 203 (1997) .......................11
Beverly Hills Fan Co. v. Royal Sovereign Corp.,
21 F.3d 1558 (Fed. Cir. 1994) ..................................10
Brulotte v. Thys Co., 379 U.S. 29 (1964) .....................13
Brunette Mach. Works, Ltd. v. Kockum Indus.,
Inc., 406 U.S. 706 (1972) ...........................................8
City of Springfield v. Kibbe, 480 U.S. 257 (1987) .......12
Fourco Glass Co. v. Transmirra Prods. Corp., 353
U.S. 222 (1957) ................................................ passim
Gross v. FBL Fin. Serv., Inc., 557 U.S. 167 (2009)....... 12
In re Apple, Inc., 581 Fed. Appx. 886 (Fed. Cir.
Sept. 11, 2014) .........................................................20
In re Heartland LLC, 821 F.3d 1138 (Fed. Cir.
2016) .................................................................. 10, 15
In re Nintendo of Am., 756 F.3d 1363 (Fed. Cir.
2014) ........................................................................20
In re TOA Techs., Inc., 543 Fed. Appx. 1006 (Fed.
Cir. Oct. 3, 2013) ......................................................20
In re Toyota Motor Corp., 747 F.3d 1338 (Fed. Cir.
2014) ........................................................................20
In re TS Tech USA Corp., 551 F.3d 1315 (Fed.
Cir. 2008) .................................................................20
In re WMS Gaming Inc., 564 Fed. Appx. 579
(Fed. Cir. Apr. 23, 2014) ...........................................20
iii
TABLE OF AUTHORITIES – Continued
Page
J. McIntyre Mach., Ltd. v. Nicastro, 131 S. Ct.
2780 (2011) ..............................................................10
Kimble v. Marvel Entertainment, LLC, 135 S. Ct.
2401 (2015) ........................................................ 11, 13
Scheiber v. Dolby Labs., Inc., 293 F.3d 1014 (7th
Cir. 2002) .................................................................11
Schnell v. Peter Eckrich & Sons, Inc., 365 U.S.
260 (1961) .............................................................. 7, 8
Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22
(1988) .......................................................................18
Stonite Prods. Co. v. Melvin Lloyd Co., 315 U.S.
561 (1942) .............................................................. 7, 8
VE Holding Corp. v. Johnson Gas Appliance Co.,
917 F.2d 1574 (Fed. Cir. 1990) ..................................9
Walden v. Fiore, 134 S. Ct. 115 (2014)........................10
CONSTITUTIONAL PROVISIONS
U.S. Const. art. I, § 8, cl. 8...........................................25
STATUTES
28 U.S.C. § 1391 ............................................................4
28 U.S.C. § 1391(c) .............................................. passim
28 U.S.C. § 1391(d) ........................................................8
28 U.S.C. § 1400(b) .............................................. passim
28 U.S.C. § 1404(a) ......................................................18
iv
TABLE OF AUTHORITIES – Continued
Page
OTHER AUTHORITIES
Brian J. Love & James Yoon, Predictably Expensive: A Critical Look at Patent Litigation in the
Eastern District of Texas, 20 Stan. Tech. L.
Rev. 1 (2017) .......................................... 17, 19, 24, 25
Council of Economic Advisors, The Patent Litigation Landscape: Recent Research and Developments (March 2016)................................. 16, 22, 25
Daniel Klerman & Greg Reilly, Forum Selling,
89 S. Cal. L. Rev. 241 (2016)............................ passim
Docket Navigator, 2015 Year in Review (2016) .......... 16
Douglas B. Wentzel, Stays Pending Inter Partes
Review: Not In The Eastern District Of Texas,
98 J. Pat. & Trademark Off. Soc’y 120 (2016) .... 15, 22
Frederick L. Cottrell III, et al., Nonpracticing
Entities Come to Delaware, Federal Lawyer,
63 (Oct. 2013) .............................................. 17, 18, 23
FTC, Patent Assertion Entity Activity (2016) .............24
GAO Report, Patent Office Should Define Quality, Reassess Incentives and Improve Clarity
(June 2016) ..............................................................16
Greg Reilly, Aggregating Defendants, 41 Fla. St.
U. L. Rev. 1011 (2014) ..............................................16
J. Jonas Anderson, Court Competition for Patent
Cases, 163 U. Pa. L. Rev. 631 (2015) ............... passim
Jeanne C. Fromer, Patentography, 85 N.Y.U. L.
Rev. 1444 (2010) ................................................ 10, 25
v
TABLE OF AUTHORITIES – Continued
Page
Kevin Benton, New Patent Filings Down in
2016, Lowest Since 2011: Report (2017) .................17
Kevin M. Clermont & Theodore Eisenberg, Exorcising the Evils of Forum Shopping, 80 Cornell L. Rev. 1507 (1995) ...........................................21
Kimberly A. Moore, Forum Shopping in Patent
Cases: Does Geographic Choice Affect Innovation?, 79 N.C. L. Rev. 889 (2001) ..................... passim
Paul R. Gugliuzza, The New Federal Circuit
Mandamus, 45 Indiana L. Rev. 343 (2012) ............20
Professors’ Letter Supporting Venue Reform
(July 12, 2016) .........................................................19
Ranganath Sudarshan, Nuisance-Value Patent
Suits: An Economic Model and Proposal, 25
Santa Clara High Tech. L.J. 159 (2008) ........... 23, 24
1
INTEREST OF AMICI CURIAE*
Amici Curiae (“Amici”) – 41 companies and 7 associations – submit this brief in support of Petitioner because they are all too familiar with the effects of forum
shopping in patent cases, and thus support the revitalization of the specific patent venue statute, 28 U.S.C.
§ 1400(b).
Amici companies are: Acushnet Company; Adobe
Systems Inc.; ASUS Computer International; Balsam
Brands Inc.; Bass Pro Shops, LLC; Betterment Holdings, Inc.; Campmor, Inc.; Carbonite, Inc.; Christian
Book Distributors, Inc.; Crutchfield Corporation; eBay
Inc.; Etsy, Inc.; FedEx Corporation; HP Inc.; HTC
America, Inc.; IAC/InterActiveCorp; Jockey International, Inc.; Kickstarter, Inc.; Lecorpio, LLC; L Brands,
Inc.; L.L. Bean, Inc.; Macy’s, Inc.; MediaFire, LLC;
Minted, Inc.; NeuLion, Inc.; NetApp, Inc.; Newegg Inc.;
Oracle Corporation; Overstock.com, Inc.; QVC, Inc.;
Parke-Bell, Ltd.; Pegasystems Inc.; Red Hat, Inc.; Red
Lion Hotels Corporation; SAS Institute Inc.; SAP
America, Inc.; Symmetry LLC; VIZIO, Inc.; Walmart
Stores, Inc.; Wayfair, Inc.; and Xilinx, Inc.
* Pursuant to S. Ct. R. 37.6, counsel for Amici represent that
they authored this brief in its entirety and that none of the parties
or their counsel, nor any other person or entity other than Amici
or their counsel, made a monetary contribution intended to fund
the preparation or submission of this brief. Pursuant to S. Ct. R.
37.3(a), counsel for Amici represent that Petitioner filed a general
consent to the filing of amici curiae briefs, that Respondent consented to the filing of this brief, and that a copy of Respondent’s
consent is being filed with this brief.
2
Amici associations are: Computer and Communications Industry Association (which represents a wide
range of companies in the computer, Internet, information technology, and telecommunications industries); Entertainment Software Association (which
represents nearly all major U.S. publishers of computer and video games for video game consoles,
handheld devices, personal computers and the Internet); The Internet Association (which consists of 40 of
the world’s leading Internet companies); National Retail Federation (which is the world’s largest retail
trade association, representing retailers from the
United States and more than 45 countries); North Carolina Chamber (which is North Carolina’s largest,
broad-based business advocacy organization with over
35,000 members); North Carolina Technology Association (which has over 750 members and focuses on advancing North Carolina’s tech industry); and The
Retail Litigation Center, Inc. (which advocates in the
courts for the leading retailers in the United States).
At first glance, Amici appear to have more differences than similarities. With corporate headquarters
from Maine to California, some are long established
companies, while others are start-ups. Some have
brick-and-mortar stores located across the country,
while others have only an Internet presence. Some sell
products that they manufacture, while others sell services or software.
Amici, however, share at least one thing in common – collectively, they or their members have been
sued, repeatedly, for patent infringement in one of the
3
handful of districts that hear the vast majority of all
patent cases. These districts generally are located hundreds or thousands of miles from Amici’s corporate
headquarters and from Amici’s activities accused of infringement. Venue is often based on no more than allegations that Amici do business in the district by
placing a small percentage of their allegedly infringing
products into the stream of commerce that end up in
the district, or that their allegedly infringing websites
can be viewed by individuals in the district. In other
words, under current Federal Circuit caselaw and the
realities of modern e-commerce, Amici can be sued in
virtually any district in the country and they are sued
again and again in inconvenient districts preferred by
plaintiffs. Amici have a concrete interest in the question whether there is any limitation on venue in patent
cases under 28 U.S.C. § 1400(b).
------------------------------------------------------------------
SUMMARY OF ARGUMENT
Amici agree with Petitioner that, as this Court has
ruled repeatedly, the patent venue statute imposes
real restrictions on venue, and the Federal Circuit’s
contrary view should be rejected. Based on their experience in the trenches, Amici briefly address the merits, but primarily focus on the real-world consequences
of the Federal Circuit’s misreading of the patent venue
statute, which has led to pervasive and pernicious forum shopping.
4
Before turning to the consequences of the Federal
Circuit’s error, Amici note that this is not a difficult
case. In the nineteenth century, Congress passed a
statute to restrict venue in patent cases, 28 U.S.C.
§ 1400(b), to correct abuse of the general venue statute
(later codified at 28 U.S.C. § 1391) in patent cases,
which allowed alleged infringers to be sued almost anywhere. This Court repeatedly interpreted the patent
venue statute narrowly, culminating in Fourco Glass
Co. v. Transmirra Prods. Corp., 353 U.S. 222 (1957),
which held that under Section 1400(b) a domestic corporation “resides” where it is incorporated. Although
Fourco also held that Section 1400(b) is the sole and
exclusive provision controlling venue in patent infringement actions, and is not to be supplemented by
the provisions of Section 1391(c), the Federal Circuit
nevertheless relied upon a later amendment to Section
1391(c) to conclude that this Court’s narrow reading of
Section 1400(b) in Fourco was no longer operative. Suffice it to say, the Federal Circuit cannot overrule this
Court, and neither this Court nor Congress has ever
overruled Fourco or materially amended Section
1400(b). Nothing more is needed to reverse the decision below.
Based upon its erroneous interpretation of Section
1400(b), the Federal Circuit has concluded that venue
in patent cases is synonymous with personal jurisdiction. Combined with its embrace of an expansive theory of personal jurisdiction, the Federal Circuit
effectively has held that venue in a suit against an
5
alleged corporate infringer is proper in almost any district in the country. Stated differently, the statute that
was passed to restrict venue in patent cases has now
been interpreted to apply more expansive venue rules
for corporations in patent cases than in non-patent
cases.
Extensive statistical evidence and academic research demonstrate that the Federal Circuit’s approach has resulted in rampant forum shopping. By
2001, 29% of all patent cases were filed in only five of
the 94 districts, and 44% of all patent cases were filed
in 10 districts. Since that time, forum shopping has
dramatically accelerated. Between 2007 and 2015, 52%
of all patent cases were filed in only five districts, and
66% of all patent cases were filed in 10 districts. In
2016, 44% of all patent cases were filed in only two districts, the Eastern District of Texas and the District of
Delaware, the district in which this case arose. Since
2014, a single judge in the Eastern District of Texas
has handled one-quarter of all patent cases nationwide. Recent scholarly studies have concluded that the
most popular patent districts compete to adopt procedures that will – and do – attract plaintiffs to their districts.
Choice of forum plays a critical role in the outcome
of patent litigation. Generally in federal litigation,
plaintiffs’ chances of winning drop from 58% in cases
in which there is no transfer to 29% in transferred litigation. In patent cases, the patent holder wins more
often than not when it selects the forum of an infringement action, and the alleged infringer wins more often
6
than not when it selects the forum by filing a declaratory judgment action. In the most popular patent district, the Eastern District of Texas, the patent holder
wins 72% of all jury trials. In the districts that hear
the most patent cases, courts are less likely to transfer
cases or to grant summary judgment, ratcheting up the
pressure on accused infringers to settle even weak patent cases in the face of the prospect of extended, expensive litigation. If plaintiffs can sue alleged
corporate infringers in any district in the country, it
only stands to reason that they will choose to do so in
the handful of districts in which they are most likely
to prevail or to extract a settlement.
There is no substitute for properly interpreting
the patent venue statute. Motions to transfer venue on
convenience grounds are not an adequate workaround.
Although defendants can move to transfer venue, such
motions are committed to the discretion of the district
court, are not decided promptly, and are often denied.
Almost never appealed after a final judgment, defendants occasionally file a mandamus petition to the
Federal Circuit, but mandamus petitions concerning
venue are denied nearly 70% of the time. Accordingly,
motions to transfer are not a stopgap solution to forum
shopping.
Forum shopping harms the legal system by creating inequities in which plaintiffs often can make an
outcome-determinative choice by selecting venue, and
by causing inefficiencies in which cases are litigated
far from the location of the parties, the alleged infringement, and the evidence. Indeed, forum shopping
7
in patent litigation adversely affects innovation, which
is contrary to the constitutional purpose of the patent
system, namely, to promote the progress of science and
useful arts. Justice cannot be administered blindly and
fairly if one of the parties can engage in forum shopping in order to gain an advantage. To restore justice
in patent cases, the Court should resuscitate the patent venue statute by reaffirming that the Court says
what it means and means what it says.
------------------------------------------------------------------
ARGUMENT
THE COURT SHOULD REITERATE ITS LONGSTANDING, NARROW INTERPRETATION OF
THE PATENT VENUE STATUTE TO STOP FORUM SHOPPING.
Congress Enacted a Restrictive Patent
Venue Statute. This case concerns the scope of the
special patent venue statute, 28 U.S.C. § 1400(b): “Any
civil action for patent infringement may be brought in
the judicial district where the defendant resides, or
where the defendant has committed acts of infringement and has a regular and established place of business.” In 1897, “Congress adopted the predecessor to
§ 1400(b) as a special venue statute in patent infringement actions to eliminate the ‘abuses engendered’ by
previous venue provisions allowing such suits to be
brought in any district in which the defendant could be
served.” Schnell v. Peter Eckrich & Sons, Inc., 365 U.S.
260, 262 (1961) (quoting Stonite Prods. Co. v. Melvin
Lloyd Co., 315 U.S. 561, 563 (1942)). The patent venue
8
statute “was designed ‘to define the exact jurisdiction
of the . . . courts in these matters,’ and not to ‘dovetail
with the general [venue] provisions.’ ” Schnell, 365 U.S.
at 262 (ellipsis and brackets added by Court and quoting Stonite, 315 U.S. at 565-66).
“As late as 1957 we have held § 1400(b) to be ‘the
sole and exclusive provision controlling venue in patent infringements actions.’ ” Schnell, 365 U.S. at 262
(quoting Fourco Glass Co. v. Transmirra Prods. Corp.,
353 U.S. 222, 229 (1957)). In Fourco, the Court held
that “28 U.S.C. § 1400(b) is the sole and exclusive provision controlling venue in patent infringement actions, and that it is not to be supplemented by the
provisions of 28 U.S.C. § 1391(c).” Fourco, 353 U.S. at
229. There, the Court held that a corporation “resides”
where it is incorporated. See id. at 226.
In its last word on this subject in 1972, the Court
concluded that 28 U.S.C. § 1391(d), and not 28 U.S.C.
§ 1400(b), dictated the venue of a patent infringement
lawsuit against a foreign corporation that does not “reside” in any district, but noted its prior cases had concluded that for domestic corporations, “Congress
placed patent infringement cases in a class by themselves, outside the scope of general venue legislation.”
Brunette Mach. Works, Ltd. v. Kockum Indus., Inc., 406
U.S. 706, 713 (1972). Neither the Court nor Congress
has revisited the scope of Section 1400(b) since Brunette.
9
The Federal Circuit Nevertheless Eliminated the Limitations of the Patent Venue Statute. Although this Court held that Section 1400(b)
should be interpreted strictly according to its plain
meaning without supplementation by Section 1391(c),
see Fourco, 353 U.S. at 229, the Federal Circuit nevertheless concluded that Congress changed “the longstanding interpretation of the patent venue statute” in
1988 when it amended the definition of “resides” in 28
U.S.C. § 1391(c). See VE Holding Corp. v. Johnson Gas
Appliance Co., 917 F.2d 1574, 1575 (Fed. Cir. 1990). Applying that amended definition, the court concluded
that “[n]ow, under amended § 1391(c) as we here apply
it, venue in a patent infringement case includes any
district where there would be personal jurisdiction
over the corporate defendant at the time the action is
commenced.” Id. at 1583 (brackets added). In other
words, the Federal Circuit concluded that the patent
venue statute enacted to restrict venue in patent cases
no longer imposed any additional restrictions on venue
for corporations. See also Kimberly A. Moore, Forum
Shopping in Patent Cases: Does Geographic Choice Affect Innovation?, 79 N.C. L. Rev. 889, 897 (2001) (VE
Holding “rendered superfluous the patent venue statute for corporate defendants”).
The Federal Circuit likewise has adopted an expansive view of personal jurisdiction, a view that appears more expansive than that endorsed by this
Court:
10
Despite the Supreme Court’s recent decisions
questioning the “stream of commerce” theory
of personal jurisdiction in product liability
cases, the Federal Circuit has held that jurisdiction is proper if the accused products are
sold in the forum state, whether those sales
are made directly by the alleged infringer or
through established distribution networks.
Because most accused infringers are corporations whose products are sold nationwide,
most patent plaintiffs can sue in any district.
Daniel Klerman & Greg Reilly, Forum Selling, 89 S.
Cal. L. Rev. 241, 248 (2016) (footnotes omitted); compare J. McIntyre Mach., Ltd. v. Nicastro, 131 S. Ct. 2780
(2011), with Beverly Hills Fan Co. v. Royal Sovereign
Corp., 21 F.3d 1558 (Fed. Cir. 1994); see also In re
Heartland LLC, 821 F.3d 1138, 1343-45 (Fed. Cir. 2016)
(rejecting argument that Walden v. Fiore, 134 S. Ct.
115, 121 n.6 (2014), overruled or limited Federal Circuit’s specific jurisdiction jurisprudence).
“Due to weak personal jurisdiction and venue constraints, a patentee can usually ‘choose to initiate a
lawsuit in virtually any federal district court.’ ” Klerman & Reilly, supra, 89 S. Cal. L. Rev. at 247 (quoting
Jeanne C. Fromer, Patentography, 85 N.Y.U. L. Rev.
1444, 1451 (2010); see also Moore, supra, 79 N.C. L. Rev.
at 901 (“With borderless commerce the norm and with
lax jurisdiction and venue requirements, plaintiffs in
patent cases have an unfettered choice of where to
bring suit.”). The problems that arise from conflating
the venue and personal jurisdiction determinations
are exacerbated in e-commerce patent actions accusing
11
a feature of a website of infringement when the website is operated by the defendant from its distant corporate headquarters and merely is available to viewers
in the district (along with anyone else anywhere in the
world). In such cases, the stream of commerce seemingly flows to the ends of the World Wide Web.
The Federal Circuit Overstepped its Role by
Rejecting this Court’s Ruling in Fourco. Notwithstanding this Court’s holding that Section 1400(b)
should be interpreted without regard to Section
1391(c), the Federal Circuit concluded that an amendment to Section 1391(c) changed everything. Even if
correct – which it was not – that was the wrong approach. As this Court has made plain on numerous occasions, “if a precedent of this Court has direct
application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls,
leaving to this Court the prerogative of overruling its
own decisions.” Agostini v. Felton, 521 U.S. 203, 237
(1997) (quotation and brackets omitted); see also Kimble v. Marvel Entertainment, LLC, 135 S. Ct. 2401,
2406 n.3 (2015) (in a patent case, the Court quoted
Judge Posner’s observation that a prior precedent “has
been severely, and as it seems to us, with all due respect, justly criticized. . . . However, we have no authority to overrule a Supreme Court decision no matter
how dubious its reasoning strikes us, or even how
out of touch with the Supreme Court’s current thinking the decision seems.”) (ellipsis added by Court and
quoting Scheiber v. Dolby Labs., Inc., 293 F.3d 1014,
12
1017-18 (7th Cir. 2002)). The Federal Circuit could disagree with Fourco, but it could not overrule it.
The Federal Circuit’s approach is even more dubious because it concluded Fourco no longer governed interpretation of Section 1400(b) because Congress
amended a different statute, Section 1391(c). Even if
the Court is inclined to consider legislative history, no
one seriously suggests that Congress claimed to overrule Fourco or amend Section 1400(b) when it amended
Section 1391(c). Like someone who loses a dollar in a
dark alley, but looks for it on the road under a streetlamp because the light is better, this search for the
meaning of Section 1400(b) in a different statute is
doomed to failure. See Fourco, 353 U.S. at 229 (specific
patent venue statute should be interpreted without regard to general venue statute); cf. Gross v. FBL Fin.
Serv., Inc., 557 U.S. 167, 174 (2009) (“When conducting
statutory interpretation, we must be careful not to apply rules applicable under one statute to a different
statute without careful and critical examination.”)
(quotation omitted).
This Court has never questioned Fourco or any of
its other prior rulings that venue in patent cases under
Section 1400(b) is different from venue in run-of-themill cases under Section 1391(c), and Congress has not
amended Section 1400(b) since Fourco was decided
during the Eisenhower Administration. Up to now, Respondent has not suggested that Fourco and this
Court’s prior decisions relied upon in Fourco should be
overruled. Cf. City of Springfield v. Kibbe, 480 U.S. 257,
258 (1987) (per curiam) (“We ordinarily will not decide
13
questions not raised or litigated in the lower courts.”)
(citations omitted). Particularly in the patent arena,
the proper forum for overturning Fourco and expanding venue is not the Federal Circuit, or even this Court;
it is Congress:
What is more, stare decisis carries enhanced
force when a decision, like Brulotte [v. Thys
Co., 379 U.S. 29 (1964)], interprets a statute.
Then, unlike in a constitutional case, critics of
our ruling can take their objections across the
street, and Congress can correct any mistake
it sees.
*
*
*
[T]he patent laws do not turn over exceptional
law-shaping authority to the courts. Accordingly, statutory stare decisis – in which this
Court interprets and Congress decides
whether to amend – retains its usual strong
force.
Kimble, 135 S. Ct. at 2409, 2413 (brackets and ellipsis
added and citations omitted). Because the Federal Circuit could not overrule Fourco, because this Court did
not overrule Fourco, because no one has asked this
Court to overrule Fourco, and because the proper forum to amend Section 1400(b) and thereby overrule
Fourco is Congress, this Court should reverse the decision below without further ado.
Eliminating Patent Venue Limitations
Caused Extensive Forum Shopping. Not surprisingly, eliminating the restrictions in the patent venue
statute has resulted in rampant forum shopping in
14
which a handful of districts perceived to be plaintifffriendly now handle the vast majority of patent lawsuits. This phenomenon is so pronounced today that
academics refer to it as “forum selling” or “forum competition” in which districts compete to attract plaintiffs
to file patent lawsuits in their courts. See Daniel Klerman & Greg Reilly, Forum Selling, 89 S. Cal. L. Rev.
241 (2016); J. Jonas Anderson, Court Competition for
Patent Cases, 163 U. Pa. L. Rev. 631 (2015).
Studies conducted after the Federal Circuit effectively eliminated limitations on venue in 1990 have
shown increasing concentration of patent cases in a
small handful of districts. In 2001, then-Professor,
now-Judge, Moore conducted the first major empirical
study of forum shopping in patent cases following the
Federal Circuit’s elimination of any limitations over
venue for corporations. Examining over 10,000 patent
cases resolved between 1995 and 1999, she concluded
that 29% of all patent cases were filed in only five of
the 94 districts, and 44% of all patent cases were filed
in only 10 districts. See Moore, supra, 79 N.C. L. Rev. at
902-904. Furthermore, Professor Moore discussed the
Federal Circuit’s interpretation of the patent venue
statute and found that “[t]he prevalence of forum shopping is a direct by-product of the existing statutory
framework.” Id. at 892. Notably, the district that currently handles over 40% of all patent cases, the Eastern District of Texas, did not even appear in the list of
the 10 busiest districts in Professor Moore’s study covering 1995-99, reinforcing the conclusion that forum
15
shopping and not some other factor explains the escalating concentration of patent cases. See id. at 903.
Since that time, forum shopping in patent cases
has grown markedly worse. Between 2007 and 2015,
52% of all patent cases were filed in only five districts,
and 66% of all patent cases were filed in only 10 districts. See Klerman & Reilly, supra, 89 S. Cal. L. Rev. at
249. By 2013, nearly half of all patent cases were filed
in only two districts (the Eastern District of Texas and
the District of Delaware, the district in which this case
arose), neither of which is a technology or population
center; and, in both districts, patent cases constituted
a disproportionate share of each district’s civil docket.
See Anderson, supra, 163 U. Pa. L. Rev. at 632-33 (28%
of civil docket in E.D. Tex. and 56% in D. Del.).
Although Delaware is the state of incorporation for
many companies, including some of the Amici, which
thus “reside” in Delaware under the patent venue statute as interpreted by this Court, see Fourco, 353 U.S.
at 326, for many other companies, Delaware is simply
yet another faraway venue. Cf. In re Heartland LLC,
821 F.3d at 1340 (Petitioner is Indiana limited liability
company).
These statistics, if anything, understate the concentration of patent cases in a small number of districts because non-practicing entities (“NPEs”), i.e.,
patent trolls, have no real presence and thus no “home
court” – accordingly, they are more likely to file suit in
the districts perceived to be the most plaintiff-friendly.
See Douglas B. Wentzel, Stays Pending Inter Partes Review: Not In The Eastern District Of Texas, 98 J. Pat. &
16
Trademark Off. Soc’y 120, 123 (2016) (96.2% of lawsuits filed in E.D. Tex. are filed by NPEs); cf. Council of
Economic Advisors, The Patent Litigation Landscape:
Recent Research and Developments, 3 (March 2016)
(NPEs’ share of patent litigation has increased from
under 30% in 2009 to over 60% in 2014). And when
these entities do file suit, they are more likely to
sue multiple defendants in a single lawsuit (or, more
recently, file multiple lawsuits against numerous defendants under the same patent, which are then consolidated for pre-trial purposes). See Greg Reilly,
Aggregating Defendants, 41 Fla. St. U. L. Rev. 1011,
1024 (2014) (twice as many defendants sued per case
in E.D. Tex. than national average); Klerman & Reilly,
supra, 89 S. Cal. L. Rev. at 249 (in 2010, 10% of the
patent cases were filed in E.D. Tex., but 25% of all patent defendants were sued there). “In 2007, about 20
percent of all patent infringement defendants were
named in cases filed in the Eastern District of Texas,
and this percentage increased to almost 50 percent in
2015.” GAO Report, Patent Office Should Define Quality, Reassess Incentives and Improve Clarity, 16 (June
2016); see also Council of Economic Advisors, supra, at
4 (“NPEs were overwhelmingly likely to file suit in the
Eastern District of Texas or the District of Delaware,
and these two courts together accounted for 70 percent
of cases filed by NPEs in 2014.”).
In 2015, over 53% of all patent cases were filed in
only two districts, the Eastern District of Texas (44.2%)
and the District of Delaware (9.4%), and 67% of all patent cases were filed in only five districts. See Docket
17
Navigator, 2015 Year in Review, 18 (2016). “In fact, one
judge – Judge Rodney Gilstrap of Marshall, Texas –
saw almost one quarter of all patent case filings nationwide [since 2014], more than all the federal judges
in California, New York, and Florida combined.” Brian
J. Love & James Yoon, Predictably Expensive: A Critical Look at Patent Litigation in the Eastern District of
Texas, 20 Stan. Tech. L. Rev. 1, 6 (2017) (brackets added
and footnote omitted); see also Frederick L. Cottrell III,
et al., Nonpracticing Entities Come to Delaware, Federal Lawyer, 63 (Oct. 2013) (each judge in D. Del. has
400-500 patent cases). In 2016, the concentration of patent filings decreased only slightly – over 44% of all
new patent cases were filed in the Eastern District of
Texas (35.4%) and the District of Delaware (9.2%).
Kevin Benton, New Patent Filings Down in 2016, Lowest Since 2011: Report (2017) (available at https://www.
law360.com/articles/850061/new-patent-filings-down-in20).
Because the Federal Circuit eliminated restrictions on venue over corporations in the patent venue
statute, districts can – and do – compete to attract
plaintiffs to file patent lawsuits in their districts. See
Anderson, supra, 163 U. Pa. L. Rev. at 635 (“maintaining trial management practices in a predictable manner that favors a particular type of litigant (almost
always plaintiffs) allows district courts to compete for
the business of litigation”); Klerman & Reilly, supra, 89
S. Cal. L. Rev. at 243 (judges in E.D. Tex. “have sought
to attract patent plaintiffs to their district and have
18
distorted the rules and practices relating to case assignment, joinder, discovery, transfer, and summary
judgment in a pro-patentee (plaintiff ) direction”); Cottrell, supra, Federal Lawyer at 64 (D. Del. is the second
most favorable jurisdiction for patent plaintiffs based
on case management approach). In a world in which a
patent holder can file a patent case against any defendant in virtually any district, it stands to reason
that such cases would be filed in the districts most hospitable to plaintiffs.
Motions To Transfer Are Not an Adequate
Substitute for Proper Interpretation of the Patent Venue Statute. Although defendants can move
to transfer venue pursuant to 28 U.S.C. § 1404(a), such
motions offer the wrong relief too late, placing the burden on the accused infringer to show why convenience
favors transfer, rather than on the patent holder to
show that the chosen venue is proper. Although such
transfer motions obviously are filed only by defendants
that do not “reside” in the district under Fourco’s interpretation of Section 1400(b), transfer motions do not
solve the problems caused by the Federal Circuit’s effective erasure of Section 1400(b) for numerous reasons.
First, transfer motions are committed to the discretion of the district court. See Stewart Org., Inc. v.
Ricoh Corp., 487 U.S. 22, 29-30 (1988). Second, “the
most popular current destinations for patent plaintiffs
– the Eastern District of Texas and the District of
Delaware – both have reputations as districts that are
19
unlikely to grant transfer motions.” Anderson, supra,
163 U. Pa. L. Rev. at 676 (footnote omitted).
Third, courts are slow to act on motions to transfer. See Professors’ Letter Supporting Venue Reform, at
2 (July 12, 2016) (available at http://patentlyo.com/
patent/2016/07/professors-patent-reform.html) (“The
average grant of transfer in [E.D. Tex.] took over a year
(490 days), and the average denial of a transfer motion
took 340 days, meaning that even cases that are ultimately transferred remain pending in the district for
nearly a year.”) (brackets added and footnote omitted).
Because motions to transfer (and motions to dismiss,
for that matter) do not automatically stay discovery or
litigation, defendants routinely settle their cases to
avoid the high cost of patent litigation rather than wait
a year or more for a ruling on even meritorious motions
to transfer or dismiss. See Love & Yoon, supra, 20 Stan.
Tech. L. Rev. at 21-24; cf. Klerman & Reilly, supra, 89
S. Cal. L. Rev. at 268-70 (onerous and asymmetrical
discovery requirements imposed on defendants).
Fourth, defendants rarely, if ever, challenge venue
or denial of motions to transfer venue after entry of final judgment in patent cases (and obviously cannot appeal if they settle instead of incurring the enormous
cost and risk of litigating in a hostile or remote district). Rather, on occasion, defendants will challenge
the denial of a motion to transfer by filing a mandamus
petition to the Federal Circuit, where the heightened
standard for obtaining extraordinary relief further enhances the difficulty of obtaining a reversal of a discretionary determination.
20
Finally, if the motion to transfer venue is denied,
the Federal Circuit is unlikely to overturn that decision in a mandamus petition. Overall, the Federal Circuit grants only about 10% of the mandamus petitions
it considers. See Paul R. Gugliuzza, The New Federal
Circuit Mandamus, 45 Indiana L. Rev. 343, 345-46
(2012). Before 2008, the Federal Circuit had never
granted a mandamus petition to overturn a decision
denying transfer. See Anderson, supra, 163 U. Pa. L.
Rev. at 676. Following In re TS Tech USA Corp., 551
F.3d 1315 (Fed. Cir. 2008), the Federal Circuit found
that the district court (usually the Eastern District of
Texas) had clearly abused its discretion in denying a
motion to transfer in only 11 cases by 2012, see Gugliuzza, supra, at 346 (footnote omitted), and since 2012,
in reported cases, the Federal Circuit has only granted
five such petitions (and none in the last two years). See
In re TOA Techs., Inc., 543 Fed. Appx. 1006 (Fed. Cir.
Oct. 3, 2013); In re Toyota Motor Corp., 747 F.3d 1338
(Fed. Cir. 2014); In re WMS Gaming Inc., 564 Fed.
Appx. 579 (Fed. Cir. Apr. 23, 2014); In re Nintendo of
Am., 756 F.3d 1363 (Fed. Cir. 2014); In re Apple, Inc.,
581 Fed. Appx. 886 (Fed. Cir. Sept. 11, 2014). In sum,
the Federal Circuit has only granted 17 of 54 (31%) of
the mandamus petitions concerning denial of venue
since 2008.
Stated differently, motions to transfer are decided
slowly, if at all; when they are decided, they are usually
denied; and in the minority of cases in which the denials of the motions to transfer are challenged in the Federal Circuit, those mandamus petitions are usually
21
denied. In short, motions to transfer – vested in the
discretion of the trial court – are no substitute for a
proper application of the patent venue statute, 28
U.S.C. § 1400(b), which was enacted to limit jurisdiction in patent cases.
Forum Shopping Undermines Justice and
the Appearance of Justice. “Venue is worth fighting
over because outcome often turns on forum.” Kevin M.
Clermont & Theodore Eisenberg, Exorcising the Evils
of Forum Shopping, 80 Cornell L. Rev. 1507, 1508
(1995). In their groundbreaking study of over 2.8 million federal civil lawsuits, Professors Clermont and Eisenberg found that plaintiffs’ chances of winning drop
from 58% in cases in which there is no transfer to 29%
in transferred litigation. Id. at 1512. In her study of
over 10,000 patent cases, Professor Moore found that
the patent holder wins 58% of the time when it selects
the forum, but wins only 44% of the time in a declaratory judgment action when the alleged infringer selects the forum. See Moore, supra, 79 N.C. L. Rev. at
921.
The President’s Council of Economic Advisors recently surveyed the research and found that patent litigation today is plagued by parties seeking to game the
system through forum shopping:
This type of “forum shopping” is a notable feature of the current patent litigation environment. It is not surprising that litigants are
motivated to act in this way; litigation success
rates vary widely across district courts, as do
damages and time to trial. The uncertainty
22
around litigation costs and outcomes may
lead defendants to settle quickly to avoid high
costs or unfavorable decisions, even when the
suit has little merit.
Council of Economic Advisors, supra, at 4 (citation
omitted).
Forum shopping has an even greater impact when
cases go to trial. In the most popular patent district,
the Eastern District of Texas, the patent holder wins
72% of all jury trials. See Klerman & Reilly, supra, 89
S. Cal. L. Rev. at 254. “Perhaps nothing increases the
patentee’s chances of a favorable resolution more than
making it to trial.” Id. at 251. It is not surprising, then,
that plaintiffs select venues that favor trial over summary judgment:
[J]udges in the Eastern District of Texas
grant summary judgment at less than onequarter the rate of judges in other districts.
Only Delaware even approaches the Eastern
District of Texas, and its summary judgment
rate is twice that of the Eastern District of
Texas.
Id. (brackets added); see also Anderson, supra, 163 U.
Pa. L. Rev. at 655 (judges in D. Del. “grant summary
judgment motions rarely”) (footnote omitted).
Similarly, motions to stay pending inter partes review are granted 62% of the time nationally (and
80.4% of the time nationally when the plaintiff is a
non-practicing entity), but only 15.6% of the time in
the Eastern District of Texas. See Wentzel, supra, 98 J.
23
Pat. & Trademark Off. Soc’y at 124. “Perhaps deterred
by this low success rate, fewer stay motions were made
in the Eastern District [of Texas] (1% of total 20132014 case filings) than in the District of Delaware
(2.2%), . . . [and] Northern District of California (11%).”
Klerman & Reilly, supra, 89 S. Cal. L. Rev. at 264 (ellipsis and brackets added). “As a result, the Eastern
District’s stay rate in 2013-2014 was only 0.4% of filed
cases, significantly lower than districts like the District of Delaware (1.3%) and Northern District of California (6.5%).” Id. (footnote omitted).
The prospect of trial may be enough for a patentee
to obtain a favorable resolution through settlement.
See Anderson, supra, 163 U. Pa. L. Rev. at 655-56 (“The
infrequency of obtaining summary judgment increases
costs for defendants, increases the odds of getting to
trial, and incentivizes defendants to settle out of fear
of potentially large damage awards.”) (footnote omitted); accord Cottrell, supra, Federal Lawyer at 64. Beyond the risk of loss at trial in a plaintiff-friendly
forum is the enormous cost of discovery and litigation
in a far-off venue:
By bringing suit in far-flung, perceivablyplaintiff-friendly “magnet jurisdictions,” nuisance plaintiffs can satisfy the minimum
Constitutional venue requirements while subjecting defendants to the cost and inconvenience of having to litigate in a distant location.
Ranganath Sudarshan, Nuisance-Value Patent Suits:
An Economic Model and Proposal, 25 Santa Clara
High Tech. L.J. 159, 165 (2008) (footnote omitted); see
24
also id. at 172 (“Perhaps the greatest factor contributing to the existence of nuisance-value patent suits is
the high cost of patent litigation.”). This conclusion has
been empirically demonstrated in patent litigation by
the Federal Trade Commission (“FTC”), which found,
using its subpoena power, that non-practicing entities
routinely price patent litigation settlements at less
than $300,000, which not surprisingly is below the
lower range of early-stage litigation costs of defending
a patent infringement suit. See FTC, Patent Assertion
Entity Activity, 88-90 (2016); see also id. (30% of litigation settlements are less than $50,000). Because 77%
of such settlements “fell below a de facto benchmark
for the nuisance cost of litigation[,]” i.e., less than
$300,000, “[t]his suggests that discovery costs, and not
the technological value of the patent, may set the
benchmark for settlement value” in such cases. Id. at
10 (brackets added).
In examining the most popular patent jurisdiction
resulting from the Federal Circuit’s refusal to apply
any meaningful restrictions on venue, scholars have
concluded “that the driving force behind the jurisdiction’s popularity is the combination of plaintiffs’ ability
to impose early, broad discovery obligations on accused
infringers and defendants’ inability to obtain an early
procedural or substantive victory through motion practice.” Love & Yoon, supra, 20 Stan. Tech. L. Rev. at 2224.
Accordingly, restricting patentees’ ability to
file suit in East Texas in the first place may
be the single most effective reform available to
25
Congress and the courts to limit the use of forum selection as a weapon to impose increased legal costs on companies sued for
patent infringement.
Id. at 6 (emphasis added).
Suffice it to say, commentators uniformly condemn
forum shopping in patent litigation. “Forum shopping
can be harmful to the legal system by distorting the
substantive law, by showcasing the inequities of granting plaintiffs an often outcome-determinative choice
among many district courts, and by causing numerous
economic inefficiencies, including inconveniences to
the parties.” Fromer, supra, 85 N.Y.U. L. Rev. at 1445.
Forum shopping, and the resulting rise of patent litigation with little substantive merit in a handful of jurisdictions, has reduced innovation, and may adversely
affect entrepreneurship. See Council of Economic Advisors, supra, at 1, 5, 7. This, of course, is the antithesis
of the purpose of the patent system, namely, to promote
the progress of science and useful arts. See U.S. Const.
art. I, § 8, cl. 8.
In addition to its adverse effect on justice, forum
shopping adversely affects the appearance of justice:
“Forum shopping conjures negative images of a manipulable legal system in which justice is not imparted
fairly or predictably.” Moore, supra, 79 N.C. L. Rev. at
892; see also id. at 924-30 (discussing the “evils” of forum shopping, namely, inequity and inefficiency).
“Forum shopping has fundamentally altered the
landscape of patent litigation in ways detrimental to
26
the patent system as a whole.” Anderson, supra, 163 U.
Pa. L. Rev. at 637 (footnote omitted). “Court competition creates even more problems, ranging from reduced
trust in the judicial process to uneven playing fields for
litigants.” Id. By reviving the currently moribund patent venue statute, 28 U.S.C. § 1400(b), in accord with
its express language and original intent, the Court
could restore trust in the judicial process and reinstate
a level playing field. And, perhaps, once again, the patent system could promote the progress of science and
useful arts.
------------------------------------------------------------------
CONCLUSION
Amici Curiae respectfully submit that the Court
should reverse the decision below.
PETER J. BRANN
Counsel of Record
DAVID SWETNAM-BURLAND
STACY O. STITHAM
BRANN & ISAACSON
184 Main St., P.O. Box 3070
Lewiston, Maine 04243-3070
(207) 786-3566
[email protected]
Attorneys for Amici Curiae
February 6, 2017